New comparison tool for car financing in France

On November 20, 2026, French customers will be able to compare the effective annual rate (EAR) of their lease option agreement (LOA) with that of a conventional car loan. This change is part of a broader reform based on a European directive aimed at improving transparency in consumer credit.

LOA and EAR explained

A lease option agreement (LOA) allows customers to rent a car with the option to buy it later, often with lower monthly payments. However, the EAR, which reflects the true annual cost of the financing, can be higher than that of a conventional loan. Sellers will need to explain this difference to customers.

Impact on sales and contracts

The reform will change the documents provided to customers and the way sales teams operate. Salespeople will need to explain more details, such as down payments, contract duration, and the total cost, rather than focusing only on the monthly installment. This adds complexity to the sales process and requires more training for dealership staff.

Usury rate and data collection

The introduction of the EAR also brings the issue of the usury rate, which sets a legal limit on interest rates. For the fourth quarter of 2026, the first usury rate based on new calculation methods must be determined. Some lenders have already adapted, while others have not, raising concerns about the accuracy of the data collected.

Cancellation and repurchase rules

Customers will have fourteen days to cancel their financing agreement, but the rules for canceling the sale of the vehicle are different. If a customer cancels within the first three days, the sale is also canceled. From day four onward, the customer can still cancel the financing but must buy the car and find another way to pay for it. These rules must be clearly communicated at the time of signing.

Early purchase options

The reform also affects the purchase option available to customers under an LOA. This option allows customers to buy the car before the end of the contract, which could become more common if the calculation is favorable. However, the extent of this change is still unknown, and the application of the new rules remains unclear.

Shift to long-term rental possible

Some industry professionals suggest that the increased complexity of LOA agreements might lead to more interest in long-term rental (LLD) options. However, predicting a shift is difficult due to the varying risks and complexities involved in managing vehicle depreciation for individual customers.

Transparency in financing

Transparency for consumers is a key focus of the new directive. While the concept already exists in current legislation, it is now more clearly defined. The directive emphasizes that the commissions paid to intermediaries should not influence the recommendations made to customers, avoiding conflicts of interest.

UK financial scandal highlights risks

The new rules are partly inspired by a financial scandal in the UK, where banks were found guilty of a practice that involved adjusting interest rates to increase their commissions. As a result, British banks were ordered to reimburse billions of euros to affected customers, highlighting the importance of transparency and fair practices in consumer finance.